Financial Management Cases: Warren E. Buffet, 2005

MGT520 FINANCIAL
MANAGEMENT CASES
WARREN E. BUFFET, 2005

TABLE OF CONTENT:
Executive Summary..................................................................2
Introduction.............................................................................2
Deep Analysis...........................................................................2
Bid price...................................................................................4
Increase in Share price.............................................................4
Conclusion................................................................................5

Executive Summary
The report has been written to discuss whether the proposed investment in the PacifiCorp is actually
an elephant and whether the proposed payment is worth. The said matter has been deeply resolved in
the later part of the report.
Introduction
The case study relates to one of the richest person in the world Mr. Warren E. Buffet who through his
company Hathaway Berkshire has taught many the spirit and strategy of investing. The present report
deals with acquisition of PacifiCorp by MidAmerican Energy Company Holdings Limited, subsidiary
of Hathaway Berkshire, from the parent company Scottish Power Plc for $ 5.1 billion in cash and 4.3
Billion dollar of preferred stock. The said deal was the second largest in his career. Mr. Buffet is a
man of principles and follows value based investment strategy guided by Benjamin Graham. Further,
the case study elaborates the doctrine of Mr. Warren E. Buffet along with his companion Mr. Charlie
Munger.
The case study concludes with certain unchartered answers and the report deals to unravel the
mysteries presented in the report.
Deep Analysis
The report presents that the company of Mr. Buffet has returned a compounded growth of 24% on
year on year basis for the period 1965 to 2004. Further, whether the company can continue to earn
such a high return post such huge funds available in the company and with limited opportunities in
external market.
The PacifiCorp financial shows a net income of $ 248.1 Million and 251.7 $ on the sales of 3194.5 $
Million and 3048.8 $ million. The return for both the years is approx..8% on sales and the
computation of return on equity is presented as under:
Sl. No Particulars Equity Net Profit Return on Equity
1 2004 3071.9 248.1 8.08%
2 2005 3320 251.7 7.58%
Assumption: Investment is represented by Equity